Storm clouds gathering yet again for FOM and co.

There could be trouble on the horizon for Formula 1’s FOM and Strategy Group. Reports emerged over the weekend that FOM could be the subject of a formal complaint to the European Union regulators by some of the smaller teams within the sport in relation to how the sport is being managed.

This new action is follows the smaller teams’ failed attempt at boycotting the 2014 Austin Grand Prix amid guarantees by FOM Chief Executive Bernie Ecclestone to review the allocation of payments. Since then, momentum towards a possible complaint has been building, with the smaller outfits accusing the sport’s controversial Strategy Group of slowly pushing them to the brink of collapse by prioritising the interests of the bigger teams.

Financial problems has seen both Caterham and Marussia forced into administration with others also on the brink, most notably Sauber and Lotus and of course Force India who is yet to introduce the b-spec version of their car.

The purpose of the formal complaint to the EU regulator is to have them take a closer look at the current governance and financial structure of Formula One. Currently sums of up to $100m is awarded individually to the top teams in a deal which runs to 2020 as well as no representation of the small teams at Formula One’s Strategy Group. The outcome of this investigation by the EU regulator should determine whether the governance and financial structure contravenes competition rules.

Since taking up the post of the EU’s competition commissioner last year, Margrethe Vestager, has so far launched cases against major organisations such as Google and the Russian state-controlled gas monopoly Gazprom. Showing she has the drive to go after the big companies it is likely that FOM will not be a task to big for Vestager. The complaint would be against Formula One Management and F1’s commercial rights holder led by Bernie Ecclestone and FOM’s largest shareholder private equity group CVC Capital Partners.

Presently there are no details as to who the teams behind the complaint are however those involved said the complaint would more than likely be sent to Vestager fairly soon. “There’s a head of steam now. This isn’t a problem that’s going away,” said one.

According to the Financial Times, there are two main elements to this complaint.

“First, it contends that F1’s strategy group, the body that makes judgments on areas such as technology, regulation and car design, tilts decisions in favour of the leading teams.”

“They also contend that F1’s revenues from media rights and sponsorship are allocated disproportionately in favour of the bigger teams. Even when it fails to win the championship, Ferrari still gets the largest payout, the smaller teams allege.”

Not all the smaller teams would be involved in the complaint and many of the potential signatories have asked to remain anonymous due to the fear of retaliation.

When asked recently about the pending complaint, Bernie Ecclestone sounded somewhat optimistic. “It is strange. I would like to know what they [the smaller teams] want,” he told the Financial Times. “Nobody has ever made any requests to me about what they want. We will wait for the complaint. They all signed contracts. I hope the complaint goes ahead and the competition authorities have enough patience and time to deal with it.”

When asked to comment on the merits of the complaint, Vestager remarked that she would continue to “monitor the situation closely”.

Those close to the complaint have stated that they are currently finalising their submission so as to ensure it addressed initial reservations from the EU.

For such a complaint to be successful, officials in Brussels have stated that they would need to establish whether the sports current structure caused broad harm to fans and the wider economy, and not simply there to handicap the smaller teams.

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13 responses to “Storm clouds gathering yet again for FOM and co.”

Harm to fans is via putting tv behind a paywall…but as these contracts are open to bidding don’t hold out hope the EU will help on that count. Likewise pricing traditional European racetracks out of holding races. I would hope though the Strategy group make up and bonus payments to Ferrari/Red Bull/Merc etc could be challenged, smells like cartel behavior to me. If the EU could at least do that I’d forgive them for limiting my vacuum cleaner, think I’m with Bernie for louder vacuums 🙂

What is also interesting to consider in this whole issue is that if the complaints is well formulated and the EU decides to take action it’s not going to be good for FOM. After the recent FIFA scandals where it took the Americans to sort out the European based organisation, something that has hugely embarrassed several high ranking EU officials, it is likely that on this matter they will want to show they are no pushovers and now how to take action against these kinds of organisations. If that happens than the outcome can be as small as forcing FOM to renegotiate the ‘place de concorde’ like contracts or be as heavy that the whole FIA is forced to overhaul their F1 organisational structure (strategic working group and world motorsport council) and if the FIA is really unlucky they are not only forced to the change the F1 organisational structure but also the way how the president is elected (which isn’t very democratic either and has a structure that encourages bribing)

But also the least likely. The lease is handed out by the FIA and not the EU. The FIA has to declare FOM unfit to run F1. The EU saying something is wrong with F1’s governance structure is unlikely to result in the FIA declaring FOM unfit to run F1, especially since the FIA agreed to this structure (in return for some cash). But who knows since the EU was the one that forced the FIA to relinquish their commercial rights to the sport they may decide to reverse that decision.

The EU could rule the deal between the FIA and FOM null and void under European competition laws. You could argue that neither side have stuck to the agreements they made with the EU commission some years back.

It’ll be interesting to see if Todt has been playing a long game to wrestle control of F1 away from FOM via the EU. Or he’s just incompetent.

When asked recently about the pending complaint, Bernie Ecclestone sounded somewhat optimistic. “It is strange. I would like to know what they [the smaller teams] want,” he told the Financial Times. “Nobody has ever made any requests to me about what they want. We will wait for the complaint. They all signed contracts. I hope the complaint goes ahead and the competition authorities have enough patience and time to deal with it.”
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After scuttling the COTA protest by promising to review the financial structure – particularly payouts – and having that payout structure look exactly the same today as it did then… Bernie has the nerve of the best high stakes poker players (nod the the WSOP tournament being held now).

“They all signed contracts,” is one of the more incredible public false equivalency statements I’ve seen in awhile.

I hope this angers the collective that comprises, “F1 Media,” to take a real stand against Ecclestone’s cavalier attitude toward the very teams of which he was once a part and reveal that the emperor really is naked.